CMA wraps up Christmas present for Taylor Wimpey leaseholders

Through accident and regulation, Britain has more or less arrived at the right place with regard to leasehold property and the sometimes scandalous terms it has been sold under. That’s no way to govern, says James Moore

Taylor Wimpey’s leaseholders can celebrate better terms (PA)

Most of us look set for another grim Covid Christmas but lo, a star has, at least, started shining for the owners of leasehold properties. It comes courtesy of the Competition and Markets Authority (CMA). Bet you never expected to read that.

But ’tis true. The star’s light is even shining on some gold for those who bought them from Taylor Wimpey.

The regulator and the house builder have just signed a deal that draws a line under the company’s involvement in the long-running leasehold property scandal.

First a quick explainer: leaseholders don’t own the land on which their properties are built and are typically charged ground rent by the freeholders as a result.

A few years ago, developers came up with the idea of selling leases which doubled the rent every 10 years while flogging the freeholds to investors. Extra profit!

Trouble is, within 30 years a typical £250 ground rent would turn into £2,000 and then £4,000 10 years later and then... well you can do the maths. Wonderful for investors. Horrible for homeowners left with properties that became all but impossible to sell as a result.

Under the deal, Taylor Wimpey will offer the investors a compensatory bung, which they’d be advised to take because they’re sitting on a losing hand, and alter their leaseholders’ terms to the CMA’s liking.

The agreement is important because it doesn’t simply call for the removal of the egregious escalator clauses. It also strikes out a replacement the developer had been offering to its homeowners, under which ground rents would instead rise in line the the Retail Price Index (RPI).

This is obviously better than a doubling clause but still problematic. RPI, a measure of inflation, tends to run a fair bit higher than the Consumer Price Index, which the Bank of England uses (it came in at at 7.1 per cent in the year to November against 5.2 per cent for the latter).

No good, said the CMA. Your terms were unfair in the first place. So we don’t want any rent rises.

But there was no good reason for these properties to have been sold as leasehold in the first place, certainly not in the case of houses, and there are better ways of handling flats.

So the CMA is right to have played hardball… also in the previous cases it settled (Taylor Wimpey is far from the worst offender).

It should continue to exert the thumbscrews in the cases that are still active. These involve Barratt Developments, which is being investigated over its sales practices as well as its terms, along with Brigante Properties, Abacus Land and Adriatic Land. They are all investors in freeholds.

The whole affair reflects terribly on the housebuilding industry. Ditto, property investors. The fact that leaseholds are still a thing and there are still guides being published on how to avoid getting ripped off reflects terribly on the government.

It has been investigating the problem since 2017 but as for legislation, well, there are proposals to scrap ground rents and extend leases by 990 years. A bill is working its way through Parliament as part of a double-headed reform. At some point Godot might arrive to greet the people who’ve been waiting for him.

Needless to say, Michael Gove, who now holds the unwieldy title of Secretary of State for Levelling Up, Housing and Communities, insisted on getting his name on the CMA’s press release to do a little chest beating and claim some credit for the watchdog’s work.

It’s high time that he did some of his own.

It’s true that fewer people are getting ripped off because no one’s flogging escalators any more. Those who were sold them have also, largely, been sorted out.

But Britain has, more or less, arrived at the right place having lurched through a series of misadventures along the way. This is no way to govern. You only need to look at the pandemic to see that.